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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
D.K. Jain, President; Mrs. Vineeta Rai and Vinay Kumar, Members
Export Credit Guarantee Corporation of India Ltd. —Appellant
versus
Pentagon Screws & Fasteners Ltd. — Respondent
First Appeal No. 458 of 2008 and First Appeal No. 16 of 2009
Decided on 12.8.2014
Counsel for the Parties:
For the ECGC :Mr. R.R. Kumar, Advocate with Ms. I. Abenla, Advocate
For Pentagon Screws :Mr. S.D. Wadhwa, Advocate.
IMPORTANT POINT
Contract of insurance is based upon utmost good faith and in case there is breach of same, Insurance Company would be justified in not allowing claim.
Headnote:Consumer Protection Act, 1986—Sections 17, 19 and 21—Export—Payment against shipment not made by foreign buyer—State Commission while allowing complaint directed ECGC to pay Complainant Rs.12,68,050/- towards actual loss suffered together with Rs.50,000/- as compensation and Rs.10,000/- as litigation costs—As per insurance policy issued by ECGC, Insured was required to observe several terms and conditions laid down in it—There was delay on part of Complainant in filing required declaration of shipments made; taking approval of credit limit as required and also reporting default beyond time specified for the same—There was clear breach of terms and conditions of insurance policy—Merely accepting premium did not amount to condoning delay, particularly since receipt issued while accepting premium clarified that it was only an acknowledgment of cash and cheque received and did not create any liability on ECGC—Even if such delays had been overlooked in past, this is not adequate reason for justifying breach of terms and conditions of insurance policy by insured in instant case—Order of State Commission set aside. (Paras 7 to 10)
Result: Appeals Partly allowed.
Mrs. Vineeta Rai, Members—First Appeals No. 458 of 2008 and 16 of 2009 have been filed by the Export Credit Guarantee Corporation of India Ltd. (for short “ECGC”) and Pentagon Screws & Fasteners Ltd. (for short “the Complainant”) respectively being aggrieved by the order dated 11.09.2008 of the Delhi State Consumer Disputes Redressal Commission (for short “the State Commission”) passed in Complaint No. C-48/2000. The latter’s appeal has been confined to the State Commission not directing the ECGC to pay the prevailing 18% interest on the actual amount of loss suffered by it. Since the facts and the parties are similar in respect of these First Appeals, arising out of the same consumer dispute, it is proposed to dispose them of through a single order.
2. FACTS :
In its complaint before the State Commission, the Complainant had stated that it was involved in the business of export of screws and fasteners to buyers in several countries, including a single buyer company known as M/s Heads and Threads (EU) Limited in the U.K., and it had earned foreign exchange in Pound Sterling as a part of its business. To insure its business against risks, which included non-receipt of payment from any foreign buyer, Complainant had taken an insurance policy valid for the period 01.06.1995 to 31.05.1997 for a maximum liability of Rs.50 Lakhs from ECGC, which is a company under the Union Ministry of Commerce, Government of India, set up with the purpose to (i) insure and cover the perils/risks of the prospective exporters vis-à-vis the amount of money involved in foreign currency payable by the customers of different foreign countries against the imports made by them from India for any commodity/types exported by the manufacturers/businessmen etc.; and (ii) earn & mop up as much as possible foreign exchange business encouraging export from it. Complainant had a very good track record in its business dealings and had never faced any problems either from its foreign buyers or from ECGC. However, on 31.07.1996 a shipment worth Rs.9,99,415/- was made to the aforesaid buyer in the U.K., which the said buyer failed to honour by not making the required payment in foreign currency (Pound Sterling). Complainant made several efforts to procure this payment but without success. It, therefore, filed an insurance claim with the ECGC, with which it was insured, for settling the same. ECGC, however, repudiated the claim on the following grounds:
(i) the shipment had been declared late by 2½ months and also after occurrence of default;
(ii) credit limit as required had not been approved on the buyer; and
(iii) the default itself had been reported late by 4 to 5 months.
Complainant, while admitting that there was some delay in declaring the shipment and also reporting the default, stated that these were for bonafide reasons because it was pursuing the matter with the U.K. buyer and was very hopeful of consequently receiving the payment. Further, although the shipment had been declared with a delay of 10 days (and not 2½ months) but since ECGC had accepted the premium against that shipment the implication was that it had condoned the delay in filing the declaration. Complainant, therefore, filed a complaint before the State Commission praying that ECGC be directed to make the payment of the claim in question in Pound Sterling 18,115.21 (i.e. Rs.12,68,050/-) alongwith 24% interest per annum from the date of making the claim till its realization besides compensation of Rs.50,000.
3. On being served, ECGC stated that the claim was rightly repudiated since it was in violation of the provisions of the insurance policy, which was a contract between the two parties. It was specifically stated that as per clauses 20 and 21 and para 3.1 of the insurance policy, the Insured was required to obtain a specific credit limit against the buyer, prior to making the shipment. In the instant case, no such credit limit was taken by the Complainant before making the shipment
